Buying better than renting in most towns

In most of Britain’s 50 biggest towns and cities, it costs more to rent a home than to buy one, says a survey from property website Zoopla.co.uk.

The analysis of sales-v-rents costs was based on transactions involving two-bedroom flats around the country.

And it assumed assumed that buyers could get a five per cent interest only mortgage.

On average, the analysts found, the average cost of renting was 9.7 per cent above the average cost of buying.

Milton Keynes tops the list of places where renting was found to be the less attractive option.

In the Buckinghamshire town, despite its proximity to London, average rents exceeded the cost of servicing a mortgage by a staggering 43 per cent.

Renters there were found on average to be about £2,964 a year worse off than owner-occupiers.

At the other end of the scale, the analysts found it was considerably more cost-effective to rent in Poole, in Dorset, than to buy.

Anyone renting in Poole was found to be paying 27 per cent less than buyers of similar properties.

The average tenant was found to be saving £3,240 a year by renting instead of buying.

Even in London, which has by far the highest property prices in the country and where the average two-bedroom flat costs £431,366, buying was still 16 per cent more cost-effective than renting.

Average rents in the capital were costing tenants £2,137 a month against an average cost of a five per cent interest-only mortgage at £1,797 per month.

The difference was £4,080 a year in favour of owner-occupiers.

Nicholas Leeming, Zoopla.co.uk business development director, said: “The relative cost of renting as opposed to buying has increased over the past 12 months as rents have risen while house prices and interest rates have remained flat.

“Almost 750,000 would-be first-time buyers have reluctantly ended up as renters over the past three years because they can’t get a mortgage.

“With current house prices and interest rates, and with rents on the rise, the fact is that for those who can get a mortgage, there may never have been a better time to buy.”

The Zoopla.co.uk findings, which were based on real sale and agreed rent prices, confirmed a report by the Halifax in early May, which said that falling house prices and rock bottom mortgage interest costs, using three bedroom houses as the model, meant buying was better value than renting.

But the Halifax report said that buyers were having to find on average 27 per cent of the purchase price of a home as a deposit and many were still unable to get on the property ladder because of that cost.

Using the Zoopla.co.uk figures of a two-bedroom flat in London as an example, the deposit needed would be nearly £117,000 and there would be the usual purchase and legal costs on top.